Business Ethical Principles and Business Decision Making - Literature review Example

Business Ethical Principles and Business Decision Making The current global business environment requires that organisations follow and uphold ethical principles and standards. These principles and standards help in differentiating what is right or wrong in regards to societal norms and behaviours. They, therefore, offer guidance to decision makers on what actions to adopt or desist from. Failure to operate within both moral and legal frameworks has shown, from past and recent history, that a business risks collapse or serious loss of credibility. Organisations like Enron collapsed while others like Fannie Mae and Freddie Mac lost a huge deal of credibility simply by failing to instil ethical decision and execution. Business executives should, at all times, map a company’s path after sound ethical considerations. The global market place has seen increased competition and no manager should risk overlooking ethical principles at the expense of the organisation’s success. As once stated by T. Roosevelt, “to educate the mind without the morals is to educate a menace to society” (Werhane, et al., 2013). This was felt first hand by the shareholders of companies like Enron where executives made unethical decisions over the years which ultimately led to the company’s downfall (Ferrell and Fraedrich, 2012). In order to build locally and globally successful businesses managers have to make decision based on the ethical principles and standards expected of them because it is through the same benchmark that their actions will be judged. This paper elaborates that businesses should make sure that ethical principles are adhered to and that ethical issues are routinely incorporated into business decision making. The global nature of today’s business world has stretched the ethical debate. Three decades ago the ethical debate mainly centred on how businesses around the world can adopt the same ethical principles considering the dynamics of every region and country and the term Situation Ethics featured a lot (Arnold, 2011). Mostly in Asia, Africa, parts of Eastern Europe and the Middle East organisations both local and multinationals part with funds in order to access crucial government services or contracts. For example, Siemens admitted in 2007 to offering bribes totalling over two billion dollars (Parboteeah and Cullen, 2013). BAE systems, of England, is alleged to have paid the same amount to a Saudi Arabian official so as to land almost $100 billion worth of contracts in the country (Jennings, 2011). Many such examples are found in many nations across the world with both small and huge companies being involved. Of importance is the huge negative impact these scandals, whether true or not, had to the organisations in question. Regardless of the location, bribing for whatever reason is never within any set of ethical codes. As such, the situation or context does not matter in assessing decisions made because what is ethically wrong in Mumbai is also wrong in Cape Town and in Boson (Warren, 2011). This draws the discussion to the realisation that ethical principles and standards are to a large extent universal. Operating ethically is not only the role of the CEO but a collective deliberate process that engages all the employees regardless of cadre. If this is not the case, then an employee in a different branch or country will apply what they believe in addressing customer’s issues. Therefore, this code of conduct needs to be assimilated into every person such that the outside is able to clearly notice the application of ethics in the organisation’s undertakings (Barnao, Robertson and Ward, 2012). When the top management engages employees in addressing the ethical direction of a company consistency and transparency are realised. Every employee in such organisations knows exactly what is expected of them under any given situation (Stawiski, Tindale and Engblade, 2009). This trend is, however, followed only when the whole organisation upholds high standards of ethics and zero tolerance to unethical behaviour. Adopting strict ethical culture fosters cohesion within an organisation since many cases require the management to discuss with the subordinate staff so as to derive a code that is for the best interest of the organisation and without infringing on the rights of others. This harmony and good relations between the management and employees also reduces conflict between the two thereby reducing industrial actions. Productivity is also highly improved through harmonised ethical settings. Ethical decision making as has been seen is not only the responsibility of the top management but also the junior staff in their daily duties. However, the culture of ethical decision making is transmittable. In the course of managing a business numerous situations arise that bring deviations to the norm and where senior employees are involved. This is quite a crucial point for the CEO and the management to make lead by example. Subordinates take this opportunity to find out whether the management will make an exception. Organisations that uphold strong ethical values force the management to make ethical decisions and terminate such employees (Zakhem and Palmer, 2012). Weakly entrenched ethical practices result in the management making the exception thereby transmitting this culture to the subordinates. It is with the same unethical manner that customers will be serviced as well as other stakeholders. Therefore, bad ethics leads to bad business. This, in turn, reduces shareholder value out of a bad reputation, reduced sales and overall relative poor performance. Poor performance always leads to internal conflicts with shareholders pointing at the directors and directors to employees and so on. This chain of blame only lands the organisation into worse situations. It is, therefore, paramount for an organisation to foster leadership that not only upholds ethical principles but also is passionate as ensuring their realisation. A leadership committed to upholding ethical practices should express high levels of honesty. Honesty breeds trust which is critical in regards to both internal and external relations. Ethical leaders in an organisation are known not to mislead or deceive when giving information but only give the correct and factual information (Tran, 2010). When this culture is adopted from the top most to the junior most it is only a matter of time for the company to witness the fruits of honesty. Integrity is the other pillar of ethical behaviours where an individual expresses strength of character through consistency in what they say and how they act. This goes a long way to depict the company as a safe enterprise to deal with. An organisation’s management as well as employees need to be law abiding. In every territory there are laws, rules and regulations that govern interrelationships and ways of doing things (Trevino and Nelson, 2010). It is the obligation of the top executives to make policies that are always in line with such laws so as to portray the right picture to the authorities and other stakeholders. Every business exists to provide a particular service or product. The current competitive environment has witnessed a crop of leaders who authorise the production of substandard goods or inferior services either to cut on cost or beat the competition through reduced selling prices. An ethical management will, in turn, be committed to excellence in production and service delivery. This goes a long way into anchoring customer loyalty and a strong brand name hinged on high quality service and high performance and durable products. Business operations do not always run flawlessly. At some point a mistake is made whose impact is small or huge. At all times, the management and the employees should uphold ethics and be accountable for the mistakes committed. This highly boosts a company’s image and reputation even in the midst of an adversity (Beer, 2010). For example, the Malaysian Airlines passenger jet disappeared on March 8th 2014 with 239 people on board. The kind of public relations exhibited by the airline’s and the government’s spokespeople will hugely define the fate, or otherwise, of the airline far into the future. As such, utmost care needs to be taken to avoid any scenario that will appear unethical through demonstrating compassion and genuine concern for both the victims and their families and friends. Owing to the discussion above it is imperative for CEOs and fellow policy makers in organisations to understand that it is not enough to just have ethical principles and make ethical decisions (Pimentel, Kuntz and Elenkov, 2010). They also need to be aware of the various ways and means of preventing instances of unethical behaviours and poor ethical decision making. Firstly, they should be knowledgeable about the various contributors of poor decision making. Weak corporate governance is a lead factor due to poor or lack of control measures and oversight. When someone has guidelines on what to do, who to consult and what not to do it is difficult for them to mistakenly commit an offence. Oversight, on the other hand, instils a sense of accountability since one knows that in case of a deviation someone in authority is watching and punishment will be due. Overconfidence especially in challenging situations leads to poor judgement or engagement in unethical conduct. Enron, for example, was a victim of weak corporate governance coupled with overconfident executives in dealing with a looming downfall. Another approach is for the management to instil a culture that resists deviations from ethical practice (Whyatt, Wood and Callaghan, 2012). This is normally solved by having an ethics manual that guides one on what is or not acceptable. For the management, wide consultations and taking time to make critical decisions help in avoiding this vice. The management should also lead ethically. As earlier indicated, acting ethically is the best way to tell the subordinates to act ethically. The management is required to follow this with clearly expressing the values, beliefs and code of conduct expected from the employees. All these summed up act as tools for all to resist the temptation to act unethically and thus reinforce the desired behaviour (Robertson and Athanassiou, 2009). As a deterrent measure, any deviation should be punished at the earliest possible moment so as to strengthen the resolve to decide and act ethically. In conclusion, for every organisation to succeed in the current business world, upholding of top-notch ethical standards is not an option. Many giant companies have fallen and others’ reputation terribly ruined simply by their executives and employees slowly adopting unethical practices and decision making for the sake of reaping high profits. The consequences of unethical decision making negatively affect all the stakeholders from the top management to subordinate staff and from customers to shareholders. The management must lead in upholding ethical standards for others to follow. Some of these standards include upholding honesty, integrity, compassion, excellence and abiding by the law and laid down rules and regulations. These standards need to be exercised together and they need to be communicated to the junior employees. Consistency in acting ethically results in harmony within the organisation. This, in turn, reduces possible conflicts thereby increasing employees’ productivity. Owing to ethical operations, an organisation achieves trust with the external environment more so the customers which goes a long way in ensuring a successful enterprise. References Arnold, D.G. (2011) The ethics of global climate change, Cambridge University Press. Barnao, M., Robertson, P. &Ward, T. (2012) "Ethical decision making and forensic practice", The British Journal of Forensic Practice, vol. 14, no. 2, pp. 81-91. Beer, L.A. (2010) Strategic and tactical approach to global business ethics, Momentum Press. Ferrell, O.C. & Fraedrich, J. (2012) Business ethics: ethical decision making & cases, Cengage Learning. Jennings, M. (2011) Business ethics: case studies and selected readings, Cengage Learning. Parboteeah, K.P. & Cullen, J.B. (2013) Business ethics, Routledge. Pimentel, J.R., Kuntz, J.R. & Elenkov, D.S. (2010) "Ethical decision-making: an integrative model for business practice", European Business Review, vol. 22, no. 4, pp. 359-376. Robertson, C.J. & Athanassiou, N. (2009) "Exploring business ethics research in the context of international business", Management Research News, vol. 32, no. 12, pp. 1130-1146. Stawiski, S.R., Tindale, S. & Engblade, A. (2009) "The effects of ethical climate on group and individual level deception in negotiation", International Journal of Conflict Management, vol. 20, no. 3, pp. 287-308. Tran, B. (2010) "International business ethics", Journal of International Trade Law and Policy, vol. 9, no. 3, pp. 236-255. Trevino, L.K. & Nelson, K.A. (2010) Managing business ethics, John Wiley & Sons. Warren, R.C. (2011) "Are we making progress in international business ethics?", Humanomics, vol. 27, no. 3, pp. 212-224. Werhane, P.H. et al. (2013) Obstacles to ethical decision-making: mental models, milgram and the problem of obedience, Cambridge University Press. Whyatt, G., Wood, G. &Callaghan, M. (2012) "Commitment to business ethics in UK organizations", European Business Review, vol. 24, no. 4, pp. 331-350. Zakhem, A.J. & Palmer, D.A. (2012) Managers guide for ethical decision making: doing right, doing good, Momentum Press. Read More